Biden administration proposes substantial bonding rate hike to cover the cost of abandoned oil and gas well plugging
In November 2021, as part of the Bipartisan Infrastructure Law, the U.S. government allocated $4.7 billion to plug orphaned oil and gas wells across the country. While this sounds like a lot of money, researchers estimate that the costs of plugging the documented orphaned wells in the U.S. will exceed this budget. Orphaned and abandoned wells are wells that were drilled for oil and gas extraction but have been abandoned by their original operators without proper closure, plugging, or reclamation. However, while abandoned wells are typically still owned by an operator, orphaned wells have had their ownership reverted to state regulatory agencies.
Using TGS Well Data, which consists of a combination of state regulatory agency data and proprietary historical datasets, we can identify the scope of the problem. We have tabulated our estimates of orphaned or abandoned wells by state using reported well statuses, plugging reports, well production records, and other reported and inferred data attributes (Figure 1). We estimate there are over 500,000 abandoned or orphaned wells in the U.S., with 100,000 wells in Pennsylvania, 96,000 wells in Ohio, 81,000 wells in Texas, and 38,000 wells in Kansas.
(Figure 1) TGS Well Data Analytics application showing the U.S. map for orphaned oil and gas wells.
These wells can pose significant environmental and safety risks, as they may leak harmful pollutants into the air and water, potentially contaminating surrounding ecosystems and posing health hazards to nearby communities. Although estimates from various agencies and organizations differ, the general consensus is that there are hundreds of thousands of orphaned and abandoned oil and gas wells in the U.S. In the case of orphaned wells, because the former owners of these wells cannot be traced or cannot clean them up, the responsibility for plugging the wells typically falls to the government who may need further information on how best to manage the orphaned wells.
Last week the Biden administration proposed a sharp increase in bonding rates to cover the cost of plugging abandoned oil and gas wells. Several large environmental and conservation groups praised the new rules as long overdue. Under this new rule drillers would be required to pay a significantly higher upfront bond for each well drilled. A government analysis in 2019 found that existing levels were inadequate, often forcing taxpayers to cover the cost of closing wells.
Moreover, the focus on infrastructure improvements, including addressing issues like orphaned wells, aims to enhance the resilience and efficiency of the nation's energy infrastructure. By investing in modernizing and maintaining critical energy assets, the U.S. can better meet its energy needs, reduce carbon emissions, and ensure the long-term sustainability of its energy sector. Plugging abandoned wells also helps to de-risk potential CCUS storage of depleted hydrocarbon reservoirs.
To gain a sense of the larger impacts of these wells and help inform government policies, TGS Well Data provides detailed information about orphaned oil and gas wells in the U.S. and shines a light on the need to find, assess, prioritize, plug, and remediate orphaned wells.
For more information on Well Data Analytics or to schedule a demo, contact us at WDPSales@tgs.com.
